Low Interest Rates, Australia’s Economy, and Employment

How Low Interest Rates Affect Employment
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Low Interest Rates, Australia’s Economy, and Employment

  • June 17th, 2015
  • CategoriesBlog

Last month, the Reserve Bank of Australia cut the official interest rate to a record 2.0 percent low. This came after another cut which occurred in February of this year. Following a dramatic dip global commodity prices, Australia had been experiencing recent economic struggles. Important exports such as iron ore and coal both saw price drops which hurt both the mining industry and government tax revenues. But it seems Australia has begun to recover, and this is having several positive outcomes, including a rise in employment.

How Interest Rates Affect Employment

Lowering interest rates is an effective way to stimulate and improve the economy. When rates are lower, it is easier and more affordable to borrow money. This encourages spending and investment, both which help propel the economy forward.

With lower interest rates, consumers are less likely to save (as they will be earning less interest on their money) and instead utilise the funds in purchases or investments. Mortgage interest rates will lower, leaving homeowners with more disposable income. This also promotes spending.

Because lower interest rates motivate borrowing and growth, many businesses take advantage by taking out loans and investing, essentially expanding their business. Too, this increase in cash flow and availability makes it easier for companies to funnel that money towards hiring. Thus, the employment rate grows and more jobs are created.

What’s Happening Here

A few months ago, RBA Assistant Governor Christopher Kent said “The economy is currently operating somewhat below its productive capacity. The forecast is for a gradual increase in the growth of demand and employment, and eventually a rise in non-mining business investment, supported by the very low level of interest rates.”

The low interest rate is key in stimulating Australia’s economic growth, and it seems like it is working, though slowly, as Kent suggested. From January to February, the unemployment rate dropped from 6.4% to 6.1. This was a small but positive step. In March, an additional 37,700 jobs were created, heralding great news for the economy and for employment. In May, 42,200 more jobs were created, many of them part-time, bringing the total number of employed Australians to 11.76 million. These figures greatly surpassed analyst expectations; economists expected a growth of roughly 10,000 jobs. This resulted in the lowest unemployment rate in 12 months: 6.0%. Other areas of the economy have not displayed as significant of growth as hoped, but the steady trend in employment gives hope to Australia.

Jobs, Jobs, Jobs

Job growth is occurring across industries. If your business is looking to take advantage of this economic upturn, an established recruitment agency can help. Our team at On Line Recruitment and Labour Hire has years of experience matching excellent candidates with the right roles and companies. Let us help you find the employee you’re looking for to make a positive impact on your business. Contact us today by phone or by web and let’s get the process started.

Or, if you’re a job seeker looking to take advantage of this growth in Australian employment, get in touch with us. We offer a comprehensive service to assist candidates in landing exceptional roles.

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